For some strange reason that we cannot fathom, individual Key Performance Indicators (or KPIs) are still widely used as a way to determine how well employees are doing their job. But why?

Sure, in theory, KPIs are supposed to offer a clear-cut and objective way to measure and assess an employee’s performance. Each team member is given a series of personal goals to meet across a window of time, and a manager then evaluates whether they succeeded. While people who perform well are likely to be rewarded with bonuses or promotions, not ticking off your KPIs might put your job at risk. It sounds logical enough, but there are some major problems with this concept.

If you’re a business owner, there’s nothing to gain by pressuring your team members to hit arbitrary personal targets. Quite the contrary. The reality is that KPIs do not accurately measure how good someone is at doing their job and can create a bunch of additional negative consequences for your employees and for your business. You might know that we work quite differently at Cliniko, and avoiding individual employee KPIs is part of this! Here’s why.

Rather than helping, KPIs end up:

1. Negatively impacting employee performance

The real kicker is that KPIs and reward-based systems often have a negative effect on an employee’s performance. It isn’t just that this approach doesn’t work—it can actively harm someone’s capacity to do their job well!

Due to a strange quirk of human nature, it turns out that when you try to incentivise people based on performance for these kinds of tasks, they start to underachieve. It sounds completely counter-intuitive, we know, but it’s well-documented. (If you’re curious to read more, you can check out this article in The Harvard Business Review or this paper in The Review of Economic Studies).

2. Consuming everyone’s time

Formulating, discussing, and agreeing on KPIs eats up everyone’s time and bogs a business down in bureaucracy. It then takes additional time to oversee whether these targets are being achieved, which often becomes a significant part of a manager’s duties (and is part of why we’ve never had managers at Cliniko, but that’s a whole other conversation!). Time is precious and could be much better spent on more important things.